It’s too early to cycle into cyclical and interest rate sensitive stocks as the yields on US Treasury bonds keep rising.
Miners, energy stocks, and general insurers are the sharemarket’s best antidote to the value destruction wrought by the bond sell-off, which signals accelerating inflation ahead, strategists warn.as investors demand more compensation in the form of higher yields, the alternatives in the sharemarket are limited, according to Barrenjoey’s Damien Boey.
“Insurance stocks benefit as rates rise. We like travel, Qantas is reeling from political developments and is cheap. Telstra is another one, as we think the market saw higher bond yields as a reason to sell all bond proxies, but we think not to be indiscriminate, healthcare names are defensive as well.”
“US government debt is more likely to go up than consolidate, so that means the amount of money the US government and the Fed need to create to service the debt and pay the interest is enormous, you’re talking maybe 3 per cent of GDP,” he said. “So, I’m not saying the government is going broke, but people are saying fiscal policy is dominating interest rates, not monetary policy.
On October 20, Insignia said its chief executive Renato Mota will leave in February, as it struggles to integrate acquisitions and stabilise funds under administration outflows.
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